<p>
  Option moneyness describes the relationship between an option's  strike price and the underlying asset's price. It has important implications for options trading.
</p>
<table class="table qc-table">
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<td style="text-align: left;"><b>At the Money(ATM)</b></td>
<td style="text-align: left;">The strike price is the same as the current price of the underlying asset</td>
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<td style="text-align: left;"><b>In the Money(ITM)</b></td>
<td style="text-align: left;"><strong>Call Option</strong>: the strike price is below the current trading price of the underlying
<strong>Put option</strong>:  the strike price is above the spot price of the underlying</td>
</tr>
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<td style="text-align: left;"><b>Out of the Money(OTM)</b></td>
<td style="text-align: left;"><strong>Call Option: </strong>the strike price is above the current trading price of the underlying
<strong>Put Option:</strong> the strike price is below the current trading price of the underlying</td>
</tr>
</tbody>
</table>
<p>
  For example, if the price of Apple stock is at $140, then all calls with a strike price below $140 are in the money calls, all puts with a strike price above $140 are in the money puts.  All calls with a strike price above $140 are out of the money calls, all puts with a strike price below $140 are out of the money puts.
</p>
<p>
  But why are they in the money or out of the money? For a call option as an example, it is ITM because it already has an intrinsic value. If you buy the call option and own the right to buy AAPL at strike price $143 and the current market price is $150, then this call option is in the money 150-143=$7. If you need to exercise it, you can buy shares of AAPL at $143 and sell them immediately for $150 and secure $7 profit.
</p>
<p>
  Likewise, for a call option, it is OTM because it doesn't have any intrinsic value. If you buy the call option and own the right to buy AAPL at strike price $143 and the current market price is $130, then this call option is out of the money 130-143=-$13. If you need to exercise it, you can buy shares of AAPL at $143 and sell them immediately for $130 and then you will lose $13. In this case, you would not do that. But why this kind of OTM options still traded in the market and you need to pay for them? That because they still have time values and have time to expiration. There is probability or there is the expectation from the OTM option holders that the apple price will go up and above the strike price before the expiration.
</p>
